XLF: Banks (BAC, JPM, GS) Lead Surge; PRU, LNC Earnings Preview

By Murray Coleman

Financials are trading up in pre-markets as optimism rises for more action on the Greek debt crisis ahead of Thursday’s G-20 meeting of top industrialized nations. Also, investors will be watching closing for any signs of more stimulus initiatives when the Federal Open Market Committee meeting concludes today with Fed Chairman Ben Bernanke set to host a news conference at 2:15 p.m. eastern time.

The broad FinancialsSelect Sector SPDR (XLF), which fell 4.7% on euro zone worries yesterday, was most recently ahead by 1.7%. Particularly strong were banks: Bank of America (BAC) was up 3.6%, JPMorgan (JPM) was pointing up 2.1% and Goldman Sachs (GS) was advancing 2.2%.

Aiding Wednesday’s early good cheer was data from ADP showing that private-sector payrolls increased 110,000 in October.

Markets look to ADP’s report on private-sector payrolls to provide some guidance on the U.S. Labor Department’s jobs estimate, which will be released Friday.

Analysts polled by Dow Jones Newswires expect overall nonfarm payrolls to increase just slightly, by around 90,000 in October. The unemployment rate is expected to stay around 9.1%.

Earnings to watch today in the sector include Lincoln Financial (LNC) and Prudential ( PRU).

After markets close, the consensus of analysts polled by Thomson Reuters is for LNC to report quarterly earnings of 93 cents a share, up from 63 cents in the September 2010 quarter.

PRU’s also reporting after markets close. The Street’s expecting EPS of $1.54 a share, a drop from $2.12 a share a year earlier. But one point to keep in mind — the ranges given by analysts was wide, though top-line forecasts didn’t breach $1.79 a share.

While investors will be looking for some signs of a move by the Fed to usher in a new round of quantitative easing, rates — which haven’t been adjusted since December 2008 — could also be a development worth watching. A move away from the current 0 to 25 basis points range isn’t expected.

Interestingly, a poll by Bloomberg of leading analysts showed that while none are predicting the Fed will boost rates, 69% believe there will be a third round of quantitative easing, or QE3. Some 36% expect such a move to come, however, early next year rather than in 2011.

The FOMC will release its policy statement at 12:30 today. The FOMC forecast is scheduled to be released at 2:00 p.m. followed by Bernanke’s meeting with the media.

The FOMC said after its September meeting that it saw “significant downside risks” to the U.S. economy. The economy strengthened in Q3, growing at an annual rate of 2.5% versus 0.4% in the first-quarter and 1.3% in the second.

In a recent New York Times editorial, former White House economist Christina Romer urged the Fed to adopt a target for nominal gross domestic product. Bernanke has said he’d like to see more transparency in the Fed’s forecasting process.

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